Friday, March 13, 2009

Sooner or Later it all comes crashing down...

"American Apparel came this close to filing Chapter 11 bankruptcy today. The chain either had to renegotiate the terms of its loans or raise at least $16 million by today. Thankfully, at midnight the company finalized a loan of $80 million, enabling them to avoid a Chapter 11 filing, the embarrassment thereof, and immediately pay off a $51 million loan. By paying off that loan American Apparel avoids penalties and enjoys breathing room on a separate $60.6 million line of credit from Bank of America, terms of which were tied to the other loan.

American Apparel has been struggling with financing for months, despite breakneck expansion and strong sales (fourth-quarter earnings will be reported Monday — can't you hardly wait?). Since December, founder and CEO Dov Charney has been forced to make two loans totaling $6.5 million from his personal bank account to his hipster empire to keep merchandise flowing and ensure that new stores continue to open. In 2008, American Apparel opened 81 stores and last month it opened three more, for a total of more than 260 stores. And new stores are on the way in Newfoundland, Dublin, New Haven, and Dresden, Germany."


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